Derby’s departure doesn’t solve Transnet quandary
Many have celebrated the fall of Transnet boss Portia Derby, as though executive leadership was the sole cause of the entity’s disintegration. Now that the Transnet crisis has been personalised around her, you may think the problem is solved and a suitable replacement is around the corner.
Hardly. Anyone putting up their hand for that role in the current environment should be assumed certifiably mad, or a chancer.
Derby’s departure is just half a page in a long book on state capture and failed leadership. Pinning Transnet’s operational failures on her doesn’t explain the full story of what has happened at the state-owned enterprise since 2018, when the Zuptas were chased away.
Transnet was one of the badly captured entities but was still in decent operational and financial health. Derby justifiably cops much blame for how it disintegrated under her watch.
Under her watch, the baby was thrown out with the bathwater when scores of people were driven out to make way for a new, clean team to undo state capture. The same happened at Eskom, when the entity was denuded of engineering capacity when state capturers were driven out along with throngs of good people.
André de Ruyter and Derby were signature appointments at SOEs under the “new dawn”. That they both have left represents a 100% failure rate, and public enterprises minister Pravin Gordhan and President Cyril Ramaphosa must contend with that.
The boards and the government thought these were skilled leaders. They couldn’t have become bad overnight if they were indeed capable, strong leaders. But we are clearly dealing with the politicians’ poor judgment, and potentially their contribution to the executive failures, as much as the follies of the departed CEOs. Ramaphosa and Gordhan owe each other, and all of us, a visit to the mirror, together and individually.
But they will likely move on to another chapter of rewriting state capture and continue looking for CEOs at Eskom and Transnet. No-one can fix these organisations under the current system of political dysfunction. Both are far too corrupt and broken. We have to imagine a new set-up instead of this painful requiem for such apartheid creations.
The ANC cannot reform the economy fast enough because it lacks ideological clarity and skills. What is required is the dilution of the risk, which is concentrated in the failing state. We need someone with the capacity in this case, the private sector to play a much more significant role in offering the services the state fails to provide.
Speedy energy sector reform would render Eskom’s generation division redundant which would be a sign of ANC success. The government can still take the credit when its policy metamorphosis keeps the lights on, albeit by reducing its own role. We need to take a sledgehammer to the current organisation of state assets, and have them bought by people with a better, more flexible balance sheet. That’s the reality. The ANC has ruined most of what it got from the apartheid government; that some family silver must be sold cannot be ignored. The further down the dark hole of SOE collapse we go, the more our assets will be submerged in public debt and economic mayhem.
While we personalise Transnet’s problems, another train could smash us soon: its debt cliff. That part of the crisis receives little attention yet stands out as a big risk to the economy.
A Transnet default would mean the debt of other state entities could become repayable due to cross-default clauses. That would throw out the national budget’s contingent liabilities framework. And that would cause havoc among domestic investors, such as banks that are overweight on state bonds. It would be the realisation of a systemic crisis.
It’s unlikely that Transnet would be allowed to default, but avoiding it will require nervous moments at the National Treasury as it looks for more money to avert the crisis. The debt would probably be refinanced at far more unfavourable terms, under junk conditions. The dreaded debt spiral is in play now as we sink deeper into the dark, dingy hole of decades of ANC misrule.
Solely blaming “state capture” or the likes of Derby for our problems fails to properly analyse what we are dealing with. State capture was an ANC creation; it happened because of the ANC, which created a docile and corruptible public service that could be captured with the help of its leaders. We cannot bank on the ANC to undo this mess. We are on a rocky fiscal path, made possible by poor political leadership.
Recent ideas from the state about reorganising government departments and placing SOEs under a holding company have many preconditions for the project to succeed. One is the management of the debt of the entities, which cannot be moved around into slots as if one is playing Monopoly or Snakes & Ladders.
The mess that is South Africa’s balance sheet cannot be resolved through spreadsheets and PowerPoint presentations. It is a political problem, and the discourse needs to be refocused in that direction.